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IN THE SUPREME COURT OF INDIA
B. Sudershan Reddy & Surinder Singh Nijjar, JJ.
IRIDIUM INDIA TELECOM LTD.-APPELLANT
VERSUS
MOTOROLA INCORPORATED & ORS.-RESPONDENTS
CRIMINAL APPELLATE JURISIDCITION
CRIMINAL APPEAL NO.688 OF 2005
Decided on : October 20, 2010.
(1976) 3 SCC 736 – Relied upon
(b) Code of Criminal Procedure, 1973 – Section 482 and 202 r/w section 420, IPC – 1992 PPM not showing divulgence of entire information to prospective investors – At the same time gaps in the information would not be sufficient to conclude that respondents made deliberate misrepresentation – Magistrate issuing process – It is not open to High Court to appreciate the evidence on merits u/s 482 – Principles for exercise of jurisdiction – Restated and discussed. (Para 31, 32)
(1976) 3 SCC 736; (1977) 4 SCC 451; (1983) 1 SCC 1; (1980) 1 SCC 43; (1992) 4 SCC 305; (2005) 1 SCC 568; (2007) 12 SCC 1; (2006) 6 SCC 736; (2008) 3 SCC 542; (2009) 9 SCC 682; (1977) 4 SCC 451; (1980) 1 SCC 43; (1992) 4 SCC 305; (2005) 1 SCC 568; (2007) 12 SCC 1; (2006) 6 SCC 736; (2008) 3 SCC 542 – Relied upon
(c) Indian Penal Code, 1860 – Section 415 and 420 – Corporate house – Mens rea – A corporation is virtually in the same position as any individual – It may be convicted of common law as well as statutory offences including those requiring mens rea – Criminal liability of a corporation – Offence committed in relation to the business of the corporation by a person or body of persons in control of its affairs – Corporation would be criminally liable (Para 38)
53 L Ed 613; 1944 1 All ER 119; 1956 3 All ER 624; 1971 All ER 127 – Relied upon
(1997) 8 SCC 732; (1997) 8 SCC 72; 1992 Crl. L.J. 1448; 1990 (Supp) SCC 686; (1992) Supp. (1) SCC 335; (1881) 20 Ch. D at p.13; 1896 Appeal Cases 273 (House of Lords); (1997) 8 SCC 732; (2003) 11 SCC 405; (2005) 4 SCC 405; (1999) 8 SCC 686; (1988) 1 SCC 692; (2005) 1 SCC 568 – Referred
(d) Administration of Justice – Criminal Justice – Corporate houses – Criminal liability – Company is liable for criminal offences except for crimes involving personal malicious intent – A company can be prosecuted for offences involving mandatory custodial sentence. (Para 39, 40)
(e) Indian Penal Code, 1860 – Section 415 – Misleading statements withholding vital facts for intentionally inducing a person to do or to omit to do something – Would amount to deception –Further, misleading statement wrongfully causing damage to the person deceived would amount to cheating – It is no excuse that deceived person would have known the truth by proper enquiry. (Para 42, 44)
1867 English and Irish Appeals (Vol. II), 99; (1860)1 Dr. & Sm. 381 – Relied upon
(f) Code of Criminal procedure, 1873 – Section 482 – Complaint should be examined in its entirety on the basis of the allegations made therein – High Court has no authority or jurisdiction to go into the matter or examine its correctness – The allegations in the complaint will have to be accepted on the face of it and the truth or falsity cannot be entered into by High Court u/s 482 – High Court did exactly the opposite – Not sustainable. (Para 45)
Facts of the case:
The respondent misrepresented that a gateway was needed for IT operations and for that funds were required for its JV. On such misrepresentation the respondent induced the appellant to invest huge sums of money in its JV Iridium Systems.
The said JV proved to be a failure and non-starter and it was revealed that there was no need for a new gateway.
Th appellant therefore filed a complaint u/s 420 r/w 120B IPC.
The Judicial Magistrate Ist Class, Khadki Court, Pune by an order dated 6th November, 2001 issued process against the respondent No.1 to 7 for offences under section 420 read with Section 120 IPC.
The High Court by order dated 8th August, 2003 allowed the petition and quashed the order issuing process passed by the JMFC, Pune.
Finding of the Court:
High Court wrongly exercised power u/s 482 CrPC to quash the proceedings u/s 420 IPC.
Result:
Appeal allowed.
The legal document discusses the liability of a corporation in criminal cases, emphasizing that a company can be prosecuted for offences involving mens rea, including those requiring intentional deception or dishonest conduct (!) (!) (!) (!) (!) (!) (!) . The core principle is that a corporation, being a juridical person, can be held criminally liable when an offence is committed in relation to its business activities by persons in control of its affairs, especially when their conduct shows a high degree of control and intent (!) (!) (!) .
The document clarifies that the liability of a corporation is not limited to statutory offences but extends to common law offences, including cheating and conspiracy, provided that the acts involve a guilty mind (mens rea) and are committed through agents or persons in control of the company (!) (!) . It is also established that a corporation can be held liable even if the offence involves a personal malicious intent, and the knowledge or intent of its agents can be imputed to the company (!) (!) (!) .
Furthermore, the document highlights that the mere fact that a criminal offence prescribes custodial sentences does not exempt a company from prosecution; instead, the court can impose fines and other penalties appropriate to a corporate entity (!) (!) . The liability is rooted in the principle that the criminal intent of agents or persons in control can be attributed to the corporation, making it responsible for offences committed in the course of its business operations (!) (!) .
In the context of allegations related to misrepresentation, deception, and fraudulent inducement, the document underscores that the complaint's face value should be sufficient to establish the ingredients of the offence, such as dishonest intention and deception, without delving into detailed merits at the initial stage (!) (!) (!) . The court's role at this stage is limited to examining whether the complaint discloses a prima facie case, rather than assessing the truth or falsity of the allegations (!) (!) (!) .
Finally, the document emphasizes that the power to quash a criminal proceeding under inherent jurisdiction should be exercised sparingly and only in exceptional cases where the complaint is manifestly groundless, absurd, or filed with mala fide intent. The courts should avoid premature dismissal of criminal cases based on incomplete or complex factual records, especially when the allegations, if accepted at face value, are sufficient to constitute an offence (!) (!) (!) (!) (!) (!) .
In summary, the legal principles outlined affirm that corporations can be criminally liable for offences involving mens rea, and the initial assessment of a complaint should focus on its prima facie sufficiency, without engaging in detailed merits or evidence evaluation at the quashing stage.
JUDGMENT
SURINDER SINGH NIJJAR, J.
1. The original complainant Iridium India Telecom Ltd. (hereinafter referred to as the appellant) has preferred this appeal against the judgment and order dated 8th August, 2003, passed by a learned single judge of the Bombay High Court quashing the criminal complaint dated 3rd October, 2001 filed by the appellant, inter alia, against respondent no.1, namely, Motorola Incorporated.
2. The complaint pertained to allegations of cheating under Section 420 read with Section 120B of the Indian Penal Code. Although the complaint spread over thirty five pages elaborately sets out the factual scenario, we may notice the foundational facts.
3. Motorola Inc (respondent no. 1), Iridium LLC and Iridium Inc. are a part of one group of corporations created through mergers and takeovers. Respondent no. 1 was the founder promoter of a corporation known as Iridium LLC incorporated in the State of Delaware, U.S.A; Iridium LLC was incorporated on 19th July, 1996 as a wholly owned subsidiary of respondent no. 1. Iridium LLC was the successor of another corporation known as Iridium Inc. which was incorporated on 14th July, 1991 also a wholly owned subsidiary of respondent no.1. On or about, 19th July, 1996 Iridium Inc was merged into Iridium LLC.
4. Iridium System/Iridium Project (which expressions are used inter-changeably) was represented as being the world's first commercial system designed to provide global digital hand held telephone data, facsimile, paging, geo-location services similar to today's cellular phone. It was further averred that Iridium System was conceived by respondent no. 1 in the year 1987 and it was intended to be a wireless communication system through a constellation of 66 satellites in low orbit to provide digital service to mobile phones and other subscriber equipment globally.
5. It was emphasized that Iridium Inc. was an instrumentality of respondent no. 1; the corporate veil from behind which respondent no. 1 operated. Respondent no.1 conceived, orchestrated, directed and controlled Iridium and was at all material times Iridium's dominant shareholder, supplier, financier, controller of its board, as well as the developer of Iridium's business model and the creator of the Iridium system, which was respondent no.1's proprietary space based Satellite Communication system. Respondent no.1 also designed, developed, sold, maintained and operated the hardware and software of the Iridium System/Project. It was further alleged in the complaint that respondent no.1 initially held the entire equity in Iridium. Although the equity of respondent no.1 was subsequently diluted by sale to various investors and shareholders through a series of private/public offerings, respondent no.1 continued to hold, own and control a substantial part (about 19.6%) of the equity of Iridium. From the inception respondent no.1 exercised effective control over the Board of Directors of Iridium. It was further alleged that most of the persons on the board of Iridium were either former employees or current employees of respondent no.1 who were deputed or seconded to Iridium.
6. It was further alleged that respondent no.1 was the primary contractor for Iridium system/project. As already stated above, this comprised of five segments. These five segments were supplied, sold, maintained and operated by three contracts viz. (i) the space system contract; (ii) the operation and maintenance contract and (iii) the terrestrial Network Development Contract. Each of these contracts was awarded by Iridium Inc. to respondent no.1. The said contracts were intentionally structured to ensure that although Iridium paid all the development costs, respondent no.1 would still own the most valuable assets of the Iridium system. It was also alleged that respondent no.1 provided itself with excessive profits while saddling Iridium with exorbitant costs. Substantially, all the initial capital raised by Iridium (form persons which included Irid
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